Health Check: How Prudently Does One Experience Société anonyme (EPA:ALEXP) Use Debt?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, One Experience Société anonyme (EPA:ALEXP) does carry debt. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for One Experience Société anonyme

How Much Debt Does One Experience Société anonyme Carry?

You can click the graphic below for the historical numbers, but it shows that One Experience Société anonyme had €1.91m of debt in June 2024, down from €3.79m, one year before. On the flip side, it has €329.0k in cash leading to net debt of about €1.58m.

How Strong Is One Experience Société anonyme's Balance Sheet?

According to the balance sheet data, One Experience Société anonyme had liabilities of €5.68m due within 12 months, but no longer term liabilities. Offsetting this, it had €329.0k in cash and €2.22m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €3.12m.

Given this deficit is actually higher than the company's market capitalization of €3.02m, we think shareholders really should watch One Experience Société anonyme's debt levels, like a parent watching their child ride a bike for the first time. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since One Experience Société anonyme will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Over 12 months, One Experience Société anonyme reported revenue of €6.1m, which is a gain of 51%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, One Experience Société anonyme still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping €567k. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. For example, we would not want to see a repeat of last year's loss of €1.1m. And until that time we think this is a risky stock. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 3 warning signs we've spotted with One Experience Société anonyme .

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.